Merko Ehitus                  FINANCIAL RESULTS                 08/05/2003



FINANCIAL RESULTS 6M 2003



COMMENTARY TO 6M 2003 FINANCIAL RESULTS



Merko Ehitus group 6M 2003 consolidated and unaudited net sales amounted to

1 082,1 million EEK (69,2 million EUR), and net profit was 74,8 million EEK

(4,8 million EUR).

The respective figures year ago were net sales of 668,6 million EEK

(42,7 million EUR) and net profit of 42,7 million EEK (2,7 million EUR).



Merko Ehitus group deals in the field of construction and with activities

concerned to that, in Estonia, Latvia and Lithuania. Companies of the group

6M 2003 net sales and consolidated net sales (sales outside the group) were

(in thousand EEK):



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

        Construction

        AS Merko Ehitus                           573 970          573 687

        AS Gustaf (100% partnership)               30 708           28 511

        OÜ Gustaf Tallinn (100% partnership)        1 905            1 809

        AS Merko Tartu (66% partnership)           58 363           50 038

        Tallinna Teede AS (100% partnership)       45 633           40 787

        Production of structures for small houses

        OÜ Matek (71,6% partnership)               30 304           29 959

        Construction

        AS Normanni Linnagrupp (50% partnership)    4 033                -

        AS Insenervõrgud (50% partnership)              -                -

        Production of concrete

        AS Tartu Maja Betoontooted(25% partnership)66 685                -

        Telecommunication networks

        AS Telegrupp (45% partnership)             21 112                -

Latvian companies

        Construction

        SIA Merks (100% partnership)              112 032          112 032

Lithuanian companies

        Construction

        UAB Merko Statyba (100% partnership)      245 252          245 252





Companies of the group 6M 2003 net sales and consolidated net sales

(sales outside the group) were (in thousand EUR):



                                                Net sales        including

                                                              consolidated

                                                                 net sales

Estonian companies

        Construction

        AS Merko Ehitus                            36 683           36 665

        AS Gustaf (100% partnership)                1 963            1 822

        OÜ Gustaf Tallinn (100% partnership)          122              116

        AS Merko Tartu (66% partnership)            3 730            3 198

        Tallinna Teede AS (100% partnership)        2 916            2 607

        Production of structures for small houses

        OÜ Matek (71,6% partnership)                1 937            1 915

        Construction

        AS Normanni Linnagrupp (50% partnership)      258                -

        AS Insenervõrgud (50% partnership)              -                -

        Production of concrete

        AS Tartu Maja Betoontooted (25% partnership)4 262                -

        Telecommunication networks

        AS Telegrupp (45% partnership)              1 349                -

Latvian companies

        Construction

        SIA Merks (100% partnership)                7 160            7 160

Lithuanian companies

        Construction

        UAB Merko Statyba (100% partnership)       15 674           15 674



Merko Ehitus group 6M 2003 consolidated data illustrating financial

ratios were:



                                      6M 2003        6M 2002



Net profit margin                      6,9 %          6,4 %

Operating profit margin                8,0 %          6,4 %

Return on equity (per year)           45,7 %         35,5 %

Return on assets (per year)           18,8 %         15,9 %

Current ratio                          1,4            1,5

Invoice turnover (per year)            6,7            5,8

Equity-to-assets ratio                40,2 %         43,0 %





Year 2003 6M consolidated and unaudited income statement and balance sheet

are compiled in accordance with the principles of the International

Accounting Standards (IAS), and correspond with the Estonian legal acts

regulating the accounting principles used. 





INCOME STATEMENT 6M 2003

consolidated, unaudited in thousand EEK and EUR



                                         EEK                   EUR

                                  2003.a.     2002.a.    2003.a.    2002.a.

                                  6 months    6 months   6 months   6 months



Sales                            1 082 075     668 568     69 157     42 729



Cost of sales                     (960 336)   (597 084)   (61 377)   (38 161)



Gross profit                       121 739      71 484      7 781      4 569



Marketing expenses                  (7 664)     (6 124)      (490)      (391)

Administrative expenses            (31 743)    (22 611)    (2 029)    (1 445)

Other operating income               4 824       8 200        308        524

Other operating expenses              (848)     (8 357)       (54)      (534)



Operating profit                    86 308      42 592      5 516      2 722



Financial income and expenses from

stocks of subsidiaries                   1           -          0          -

Financial income and expenses from

stocks of associates                 2 403         773        154         49

Financial income and expenses from

other noncurrent fin. investments    1 014           0         65          0

Interest expense                      (688)       (230)       (44)       (15)

Foreign exchange gain               (2 398)     (1 923)      (153)      (123)

Other financial income and expense  (4 003)       1 638      (256)       105

Total financial income and expenses (3 671)         258      (235)        16



Profit before taxes                 82 637      42 850      5 281      2 739



Income tax                          (6 530)     (2 119)      (417)      (135)



Net profit (loss) for the

financial year                      76 107      40 731      4 864      2 603



Minority interest                   (1 265)        (35)       (81)        (2)



Net profit (-loss) for the group    74 842      40 696      4 783      2 601



Net profit (-loss) per share

(basic and diluted, in EEK and EUR)   8,46        4,60       0,54       0,29





BALANCE SHEET AS OF 30.06.2003

consolidated, unaudited in thousand EEK and EUR



                                       EEK                      EUR

                             30.06.2003   31.12.2002  30.06.2003  31.12.2002

ASSETS



Cash and cash equivalents       133 006       96 310       8 501       6 155



Marketable securities            45 517       53 018       2 909       3 388



Accounts receivable             323 989      165 992      20 707      10 609

Allowance for doubtful receivables (407)        (424)        (26)        (27)

Total accounts receivable       323 582      165 568      20 681      10 582



Receivables from associates           4        1 227           0          78

Other short-term receivables     25 268       27 245       1 615       1 741

Total other receivables          25 272       28 472       1 615       1 820



Interest receivable                 744        1 145          48          73

Dividends receivable                241            0          15           0

Other accrued income                  5           32           0           2

Total accrued income                990        1 177          63          75



Prepaid taxes                    15 914       11 275       1 017         721

Other prepaid expenses            7 318        3 158         468         202

Total prepaid expenses           23 232       14 433       1 485         922



Raw materials                     2 503        2 735         160         175

Work-in-progress                 34 032       41 119       2 175       2 628

Finished goods                    1 120        1 314          72          84

Merchandise purchased for resale 46 318       66 426       2 960       4 245

Prepayments to suppliers            459          374          29          24

Prepayments for real estate       2 582       15 181         165         970

Construction-in-progress         26 515       12 229       1 695         782

Due from customers               60 880       84 962       3 891       5 430

Total inventories               174 409      224 340      11 147      14 338



TOTAL CURRENT ASSETS            726 008      583 318      46 400      37 281



Shares in associated companies   22 953       21 338       1 467       1 364

Long-term receivables from

associated companies             14 695        7 757         939         496

Other shares, holdings and

debt securities                   1 800        1 800         115         115

Miscellaneous longterm receivabl.13 489        9 906         862         633

Long-term accounts receivable         -        1 679           -         107

Total long-term financial assets 52 937       42 480       3 383       2 715



Land                             28 617       15 249       1 829         975

Buildings                         7 470       13 544         477         866

Accumulated real-estate

investments depreciation         (3 663)      (5 140)       (234)       (329)

Prepayments for real-estate

investments                      11 538       11 655         737         745

Total real-estate investments    43 962       35 308       2 810       2 257



Land and buildings               10 326       13 015         660         832

Ground lease                        458          458          29          29

Plant and equipment              74 622       66 854       4 769       4 273

Other equipment and fixtures     25 254       20 683       1 614       1 322

Accumulated depreciation        (55 779)     (50 790)     (3 565)     (3 246)

Self-constructed physical

assets under construction           325          170          21          11

Prepayments for noncurrent

physical assets                   7 179            0         459           0

Total noncurrent physical assets 62 385       50 390       3 987       3 220



Purchased concessions, patents,

licenses, etc.                      200           35          13           9

Goodwill                         (1 789)      (5 418)       (114)       (346)

Total intangible assets          (1 589)      (5 283)       (102)       (338)



TOTAL NON-CURRENT ASSETS        157 695      122 895      10 079       7 854



TOTAL ASSETS                    883 703      706 213      56 479      45 135



Short-term loans and bonds       14 094        8 087         901         517

Current period long-term

debt repayment                    4 850        4 717         310         301

Total debt obligations           18 944       12 804       1 211         818



Customer prepayments             48 716       42 820       3 114       2 737



Accounts payable to suppliers   232 250      179 011      14 843      11 441



Payables to associated companies    855        3 853          55         246

Other short-term payables         2 456            0         157           0

Total other payables              3 311        3 853         212         246



Tax liabilities                  23 976       16 344       1 532       1 045



Payables to employees            17 469       18 051       1 116       1 154

Dividends payable                 1 227          889          78          57

Interest payable                     17            6           1           0

Other accrued expenses              947        1 037          61          66

Total accrued expenses           19 660       19 983       1 256       1 277



Provisions for construction

warranty liability                3 476        3 368         222         215

Due to customers                153 105      104 917       9 785       6 705

Total current provisions        156 581      108 285      10 007       6 921



TOTAL CURRENT LIABILITIES       503 438      383 100      32 175      24 484



Loans, bonds and financial

lease liabilities                 2 557        2 604         163         166



Accounts payable to suppliers    15 290       14 900         977         952

Other long-term payables          2 440            0         156           0

Total other long-term payables   17 730       14 900       1 133         952



TOTAL NON-CURRENT LIABILITIES    20 287       17 504       1 297       1 119



TOTAL LIABILITIES               523 725      400 604      33 472      25 603



OWNERS' EQUITY

Share capital                    88 500       88 500       5 656       5 656

Share premium                     2 950        2 950         189         189

Mandatory legal reserve           8 850        8 850         566         566

Retained earnings               180 430      101 480      11 532       6 486

Net profit (-loss) for the

financial year                   74 842       98 863       4 783       6 318

Exchange rate differences          (636)         174         (41)         11

TOTAL OWNERS' EQUITY            354 936      300 817      22 684      19 226



Minority interest                 5 042        4 792         322         306



TOTAL LIABILITIES AND

OWNERS' EQUITY                  883 703      706 213      56 479      45 135





Ülo Metsaots

Management Board member

+372 6 805 104